Foundation capital

Cleveland Foundation and Master Developer part ways with Midtown Innovation District

Wexford Science & Technology, the developer tapped in 2020 to turn part of downtown Cleveland into an innovation district, is no longer leading the project.

The Baltimore-based company quietly parted ways with civic funders of the effort, a long-term revitalization plan intended to create economic opportunity and a sense of place in the heart of the Health-Tech Corridor. This week, the Cleveland Foundation announced it was funding a 95,000 square foot “collaboration center” on the site where Wexford once aimed to develop its first building.

In an emailed statement, the foundation confirmed that its deal with Wexford — an umbrella development contract that included nonprofit neighborhood group MidTown Cleveland Inc. — is terminated.

Local partners benefited greatly from partnering with Wexford during due diligence and initial planning, the foundation said. And that process underscored the importance of building on Cleveland’s strengths in art and design, technology, health and research in a central location.

But, “after considering Cleveland’s unique market dynamics and the authentic approach and vision of the MidTown Collaboration Center, we mutually agreed that the project was no longer suited to Wexford and was better suited to a model of different development,” writes the foundation. “Although he did not renew the contract after the initial phase due to new management, Wexford was a shrewd and valuable start-up partner.”

A Wexford executive did not respond to requests for comment. The foundation declined to discuss the end of the relationship in detail.

Wexford, a private company, is a leading developer of innovation districts, places where anchor institutions and established businesses collide with startups, business incubators and researchers. There are more than 100 such districts around the world, according to the Global Institute on Innovation District, a nonprofit organization that tracks projects and trends.

The Cleveland Foundation and MidTown announced their relationship with Wexford nearly two years ago, after conducting a formal search for a developer who could help realize their vision for a multi-building, mixed-use project with a horizon 10 years old. The 200-acre Cortex Innovation District in St. Louis, where Wexford completed three buildings and a public green space, is an example often cited by local economic development officials.

The Collaborative Center, however, deviates from the Wexford model, which often involves aligning a key institution – Washington University in St. Louis, for example, to Cortex – to provide rental guarantees for a significant amount of space in order to launch speculative projects. Wexford is funding its developments through a partnership with Ventas Inc., a Chicago-based real estate investment trust.

The Collaboration Center, which will rise on the northwest corner of East 66th Street and Euclid Avenue, is a different animal. There is no dominant tenant. Instead, the space will house nearly a dozen non-profit, institutional and for-profit uses, as well as a ground floor community space designed to serve as a connection to the neighborhood.

“This program on the first floor of this building will serve the entire district,” Lillian Kuri, executive vice president and chief operating officer of the foundation, said in an interview. “It will be heart and soul.”

The three-story building will be located across from the new Cleveland Foundation headquarters, which is expected to open later this year. In 2019, the foundation announced plans to move from rented space downtown to a newly built home on the southern edge of Hough, a predominantly black, low-income neighborhood.

The foundation did not intend to develop several buildings.

But an unusual group of partners coalesced around the second project – on a tight deadline that left no room for another developer to step in when Wexford pulled out.

JumpStart, a nonprofit that will move its headquarters to the second floor of the Collaboration Center and help manage the 9,000 square foot community space and conference area downstairs, is nearing the end of its lease in MidTown. Tech Park nearby in 2024.

“I think it was just the most efficient way to do it. That’s my impression,” said Ray Leach, CEO of JumpStart. “I’ve had a handful of meetings with Wexford, and they’ve all been positive.”

In addition to JumpStart, the list of tenants includes the Cleveland Institute of Art, which will use part of its space for an interactive media lab; University Hospitals, which plans to open a diabetes research and wellness center in the building; the new Center for Population Health Research at Case Western Reserve University; the non-profit Arts Assembly; the M7 Foundation; the Economic Community Development Institute, a small business microlender; and Westlake-based Hyland Software, which will establish a technical training center on the first floor.

The ground floor plan also shows a minority-owned restaurant and tapas room and a concert hall.

“For years, people working in technology with Hyland have said they want us to have a physical space closer to students,” said Caitlin Nowlin, who oversees the company’s free education programs for college and high school students.

Hyland offers coding workshops, camps and other activities at its suburban headquarters and sends employees to local schools. But transportation between Cleveland and Westlake is a challenge.

The Midtown classroom will accommodate about 30 students, Nowlin said, and the space will be flexible enough to accommodate both internal Hyland programs and classes offered by other tenants or community groups.

“Our goal is to really build and inspire careers in technology. … We want to reach as many students as possible,” she said.

A master plan for the neighborhood, an 11-12 acre area set aside by a Dave’s Markets grocery store to the west and the evolving green space of the Dunham Tavern Museum to the east, shows eight new buildings, including the offices of the Cleveland Foundation and Center Collaboration, which would eventually bear a different name.

The foundation does not expect to be self-financing and constructing all these buildings. The organization’s goal is to set the tone and prove the market, with the hope that private developers will follow suit.

“The Health-Tech Corridor is strong,” Kuri said, noting that there are already hundreds of businesses and thousands of workers in Midtown. “We hope to build the missing over there, to make everything visible.”

The foundation’s objective is to soon take possession of the property, a former industrial site currently being cleaned up. Site preparations could begin in the fall. Construction of the collaboration center is expected to begin early next year, putting the project on track to open in fall 2024.

Kuri described the project as a “mission-related investment”, where the foundation will recoup its money over 30 years through rent collection. On June 23, the foundation’s board voted unanimously to move forward.

The timing and scope of the remaining buildings, including parking, are not yet clear.

The neighborhood could support more than one million square feet of construction, about half of the potential development the foundation and MidTown Cleveland hope to see between East 55th Street and the Cleveland Clinic’s main campus over the next decade.

“The big draw to having all of these institutional partners together is access,” said Richard Barga, MidTown’s chief executive. “Access for community. Access for private industry. Access for startups to capital. Access to scale businesses in new buildings. So I would view this first building as really a launch point and a beacon to attract more of private investments that want to align with our mission, vision and values.”

The departure of Wexford did not dampen the ambitions of the partners, nor their confidence in the idea of ​​the innovation district.

“It’s been a process of finding the win-win,” Kuri said of launching a project that evolved during a global pandemic and economic turmoil. “And I think so. … I challenge you to find me another building in the country that has that kind of mix of partners, that mix of theme and community and access.”